Money and Banking Economics - Money and Banking

Demand deposits include.

Which of the following is not the function of the central bank?

Repo rate is the rate at which:

Unforseen obsolescence of fixed capital assets during production is:

The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called:

Assertion (A): Credit creation is inversely related to the money multiplier.
Reason (R): Credit creation = Initial Deposits × Money Multiplier (1/LRR). With the same initial deposit total credit, creation decreases with a decrease in the value of the money multiplier.
Alternatives:-
a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Assertion (A): Credit creation is inversely related to the legal reserve ratio.
Reason (R): Credit creation = Initial Deposits × 1/LRR. Any increase in LRR will decrease the credit creation power of the commercial banks (banking Systems)
Alternatives:-
a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Assertion (A): LRR is the fraction of deposits that are kept with the central bank as cash reserves.
Reason (R): The value of LRR is decided by the central bank.
Alternatives:-
a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Assertion (A): Central Bank advises the government on different economic and monetary matters.
Reason (R): Central Bank acts as an agent of the central government.
Alternatives:-
a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Assertion (A): M1 measure of the money supply is defined as follows: M1 = CU + DD, where CU is Currency (notes) plus coins) held by the public and DD is ‘net’ demand deposits held by commercial banks. The word ‘net’ here implies that only deposits of the public held by the banks are to be included in the money supply.
Reason (R): The interbank deposits, which a commercial bank holds in other commercial banks, are not to be regarded as part of the money supply.
Alternatives:-
a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Stock of money with the government is a part of money supply. (True/ False)

Gross demand deposits are not a part of money supply while net deposits are. (True/ False)

Giving reasons, state whether the following statements are true or false.
Increase in statutory liquidity ratio adversely affects the capacity of commercial banks to create credit.

Giving reasons, state whether the following statements are true or false.
M includes time deposits of commercial banks.

Money can be withdrawn as and when needed by the depositors in case of term deposits. (True/ False)

Fill in the blanks with correct answers.
Two components of money supply are ________ and ________.

____________ is the interest rate at which the commercial banks can deposit their funds with the Central bank.

is an apex institution of the monetary and banking structure of a country.

Central Bank acts as an adviser, banker and _______ for the government.

___________ is the fraction of deposit which all commercial banks are required to keep with the central bank.

Explain "difficulty in storing wealth" problem faced in the barter system of exchange.

Explain the "medium of exchange" function of money.

Explain the significance of the ‘Unit of Account’ function of money.

Explain the significance of the ‘Standard of Deferred Payment’ function of money.

Explain how controlling money supply is helpful in reducing excess demand.

Explain the 'Standard of deferred payment' function of money. How has it solved the related problem created by barter?

Explain the role of Reverse Repo Rate in controlling credit creation.

Explain the role of Cash Reserve Ratio in controlling credit creation

Currency is issued by the central bank, yet we say that commercial banks create money. Explain. How is this money creation by commercial banks likely to affect the national income? Explain.

Explain the process of credit creation by commercial banks.

What is 'excess demand'? Explain the role of 'Reverse Repo Rate' in removing it.

What is 'deficient demand'? Explain the role of 'Bank Rate' in removing it.

Explain the following functions of the central bank:

1. Bank of issue
2. Bankers' bank

Explain the role of the following in correcting the deflationary gap in an economy:

1. Open market operations
2. Margin requirements

1. Legal reserves
2. Bank rate

What are time deposits?

How can Reserve bank of India help in bringing down the foreign exchange rate which is very high?

State the components of supply of money.

Define money.

Define 'Statutory Liquidity Ratio'.